“No company can say for sure they will be around 10 years from now.” So said Samsung Electronics Vice Chairman Lee Jae-yong while presiding over a meeting of senior executives of his company's IT and mobile division last Friday. Lee's mentioning of crisis theory reflects the harsh reality facing the world's largest smartphone maker.
Samsung Electronics' operating profit in the first quarter plunged 60.2 percent from a year earlier, receiving a direct hit from plummeting memory chip prices. And the company cannot expect its bottom line to get better anytime soon. The grim prospects are due to slowing demand for semiconductors and mobile phones, as well as the U.S.-China trade war. If the outlook is that dismal for the globally competitive Samsung, the same will be true for many other local companies.
The Korea Economic Research Institute forecasts exports by six flagship industries in the latter half of the year will drop 11 percent compared to last year. If overseas shipments hit a snag, it will inevitably deal a severe blow to the overall economy. Unfortunately, there is no way to regain export competitiveness in the short term.
According to the Korea Chamber of Commerce and Industry, only two of the top-10 export items were replaced between 2007 and 2017, which means industrialists have failed to find new growth engines. Equally problematic is the continuous fall in productivity. A Bank of Korea report shows the annual average growth rate of the nation's labor productivity tumbled from 7.9 percent in 2001 to 2007, to 2.2 percent in 2011 to 2015.
Korean businesses' weakening competitiveness should be attributed to their lack of efforts, but the government's policy mistakes are hardly negligible. The Moon Jae-in administration always says it will boost businesses' morale, but its policies have moved toward stifling Corporate Korea.
Companies are often subject to search and seizures and driven into corners as chronic foul players. It is difficult to expect innovative growth led by businesses in this environment. Policymakers should listen to the urgent appeals of companies reeling from sluggish domestic consumption and falling exports. If the government finds it challenging to provide administrative support for businesses, at least it should not discourage companies' investment mindset by nitpicking over them.